But nothing is agreed until everything is agreed, and there are as many reasons for pessimism as for optimism. Goldman Sachs Group Inc., for its part, views a stalemate as “mutually beneficial.”
For oil buyers, however, the return of Iranian crude to a market that is about to face a big loss of Russian barrels cannot come soon enough. EU countries still import around 1.2 million barrels a day of Russian crude by sea, two-thirds of the amount they took before troops from Moscow invaded Ukraine. But the sanctions due to come into force in December will curb this flow. Shipments from Iran could help fill the void.
When sanctions were eased in 2016, following the passage of the JCPOA, Iranian crude production was restored faster and more fully than analysts had expected. In the absence of evidence of damage to oil fields or facilities, this feat can be repeated.
In early 2016, analysts polled by Bloomberg expected the Persian Gulf nation to increase production by 400,000 barrels per day in six months and 675,000 barrels per day after a year. In fact, it beat 12-month forecasts in half the time and increased production by nearly 1 million barrels per day, to 3.8 million barrels per day, a year after restrictions were eased. .
The ramp-up in exports has been even faster, with huge volumes of crude stored in onshore tanks and ships around Iran’s shores ready to be moved as soon as buyers return. The nation is in a similar position today, with around 100 million barrels of crude oil and condensate in storage that can be brought to market almost immediately.
The International Energy Agency warned in March that “it would likely take several months to completely unload the oil” as Iranian tankers “would have to be recertified and insured”. I’m not sure they’re right.
China has been willing to accept Iranian tankers into its ports throughout the last sanctions period, whether certified or not. That probably won’t change. India, another big buyer of Iranian oil in the past, has shown itself willing to facilitate its new imports of Russian crude by quickly certifying Russian tankers shunned elsewhere. If Iran is ready to compete with Russia for the Indian market, I have no doubt that the government in New Delhi will make the shipments happen.
Even though Iranian crude isn’t going to be flowing to the United States anytime soon, that still leaves Asian buyers such as South Korea and Japan and those in Europe who may demand that Iran’s aging tankers be recertified. If we refer to the period when the JCPOA was operational, between 2016 and 2018, almost none of the deliveries of Iranian crude to Europe or Japan were carried out on an Iranian tanker. It therefore seems likely that, just like in 2016, Iranian crude will return to the market faster than most analysts expect.
If so, it will bring welcome relief to refiners across the Mediterranean, which took around 600,000 barrels a day of Iranian crude last time out. They stand to lose a similar volume of Russian barrels when EU sanctions kick in and, while not an exact match, most Iranian crude would be a reasonable substitute for export quality. from the Urals.
A rapid return of stored barrels, followed by a rapid ramp-up of production from shut wells, could see Iranian crude fill a Russia-shaped hole in Mediterranean crude balances. Now all we need is to close the deal.
More other writers at Bloomberg Opinion:
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• Putin offers Russia a Potemkin future: Clara Ferreira Marques
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This column does not necessarily reflect the opinion of the Editorial Board or of Bloomberg LP and its owners.
Julian Lee is oil strategist for Bloomberg First Word. Previously, he was a senior analyst at the Center for Global Energy Studies.
More stories like this are available at bloomberg.com/opinion